Following a $69.1 million tax bill imposed by South Korea’s National Tax Service (NTS) in late 2019, cryptocurrency exchange giant Bithumb has filed a complaint with the Tax Tribunal to negate the tax bill. The NTS and Bithumb must wait 90 days for a decision from the tribunal.
Bithumb Wants Their Money Back
According to Korea Times, Bithumb wants the Tax Tribunal to nullify the NTS tax bill of $69.1 million. As per the complaint filed by the crypto exchange giant, there are no grounds for the imposed tax bill.
The company also argued that the country does not legally recognize cryptocurrency and therefore the NTS lacks the authority to impose a tax on crypto dealings and transactions.
An official representing the exchange firm said:
“We paid the full amount and have since been preparing for arguments. We believe we will be given a chance to clarify our stance in court”.
The NTS issued a withholding tax bill for $69.1 million (80.3 billion won) on the crypto exchange firm in November 2019. The tax category is an income tax paid to the government by the payer or business rather than the recipient of the income.
Bithumb headquarters in Seoul, Image from Korea Times
The tax is also usually withheld or deducted from the income directly in most cases. This means that according to the tax bill imposed, the exchange firm had no choice but to pay the amount to the NTS first before dispending the remaining income to its customers and clients.
In issuing the tax bill on Bithumb, the NTS categorized the firms’ crypto trading from foreigners as miscellaneous income and said it recognized corresponding capital gains as assets.
The tax agency argues that these gains withdrawn in South Korean Won from accounts held by foreigners qualify as taxable income. The agency further demands fair taxation based on the principle that where there is income there should be a tax as well.
NTS Says Crypto Exchanges Must Pay Taxes
As at press time there has been no word from the NTS concerning the complaint. An official from the agency said they refuse to comment on the matter and will await judgment from the tax tribunal in 90 days.
An adviser to South Korea’s financial regulator, the Financial Supervisory Service, Choi Hwoa-in said:
“Bitcoin (BTC) under the current law is not an asset. It is clear and simple. The Ministry of Economy and Finance already made that clear. The NTS pushing ahead with the tax imposition is baseless and groundless, especially since it is still awaiting the ministry opinion on the same matter it sought again”.
Experts are pointing out that cryptocurrencies are not recognized by the country’s tax law and the NTS has no authority to impose taxation on profits from digital currencies.
Furthermore, crypto and virtual currencies are not tangible and cannot be categorized as “assets”.
Experts are also claiming that the unlawful tax campaign by the NTS against Bithumb is merely a way to establish solid grounds for the tax agency to impose taxation on virtual currencies and gains from crypto transactions.
The dispute comes at a time that has seen a rise in crypto trading and profits made from digital currencies in South Korea. This growing trend might be what has moved the countries tax authorities to consider crypto trading and the correspondence gains as a new source of taxable income.
Strict Regulatory Conditions for South Korean Crypto Exchanges
As popular as crypto might be in South Korea, the country has done little to create an enabling environment for virtual currencies and crypto trading as other countries across Southeast Asia have done.
In June 2019, Blockonomi reported that the country’s financial regulator, the Fair Trade Commission implemented laws stating that crypto exchanges would be completely liable for hacks and subsequent damages.
It was also reported in August 2019 that nearly 97% of crypto exchanges in the country were facing bankruptcy due to declining trading activities. Blockchain and crypto projects were reported to have favored listing their tokens on platforms outside the country blaming the stringent measures placed on crypto trading in the country.